AGNC Investment Corp. (AGNC)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered a modest positive economic return of 2.4% driven by $0.36 dividends and a $(0.16) decline in tangible book value per share to $8.25; net spread & dollar roll income per share rose to $0.44, and annualized net interest spread improved 21 bps to 2.12% .
• Street “Primary EPS” (core) of $0.405* was beaten by reported $0.44, aided by lower funding costs, a higher asset base, and mix of hedges; GAAP EPS was $0.02 as comprehensive income per share reached $0.12 .
• Liquidity remained strong at $6.0B (63% of tangible equity) and at‑risk leverage increased to 7.5x; management issued $509M via ATM at a premium, accretive to book value .
• Near-term stock reaction catalysts: tariff-driven widening in Agency MBS vs swaps boosting forward ROE potential; management emphasized compelling levered/unlevered returns at current spread levels and comfort with dividend policy .

What Went Well and What Went Wrong

• What Went Well

  • Net spread & dollar roll income rose to $0.44/share from $0.37, as net interest spread expanded to 2.12% and repo costs reset lower; CFO: “net interest rate spread rose 21 bps…lower funding costs…higher asset base” .
  • Liquidity and risk posture: $6.0B unencumbered cash/Agency MBS (63% of tangible equity), hedge coverage ~91%, and duration gap ~0.4 years; “well-positioned for instability” per CEO .
  • Strategic capital raise via ATM ($509M, 49.7M shares) at a material premium, accretive to common shareholders and supporting ~$5B portfolio growth vs prior quarter .

• What Went Wrong

  • Tangible book value per share fell $(0.16) to $8.25 on mortgage spread widening; management noted post‑quarter book value down further to an estimated $7.75–$7.85 as of April 9 (pre-dividend) .
  • Other gain (loss), net was a $(81)M loss driven by realized losses on securities and significant losses on interest rate swaps and U.S. Treasury positions despite large unrealized gains on MBS measured at fair value through net income .
  • Asset yields on investment securities dipped to 4.78% ex-TBA (from 5.02%), while reported GAAP EPS was only $0.02 given derivative and OCI volatility .

Financial Results

Segment/Portfolio composition (Q1 2025):

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Although the widening of Agency MBS spreads drove a modest decline in our tangible book value, our anticipated portfolio returns have increased commensurately…Agency MBS offer…compelling return opportunity on both a levered and unlevered basis” .
• CFO: “AGNC’s $0.44 per common share of net spread and dollar roll income increased from $0.37…net interest rate spread rose 21 bps to 2.12%…treasury-based hedges generated additional net spread income of approximately $0.02 per share” .
• CEO on volatility: “We were well prepared…navigated it without issue…strong unencumbered cash and liquidity…$6 billion…63% of equity” .

Q&A Highlights

• Dividend sustainability and ROE: Management’s total cost of capital ~16.7%–18% vs expected returns 19%–22% given wide mortgage vs swap spreads, supporting dividend comfort .
• Volatility management: Strong liquidity (63% of equity) and lower leverage entering April allowed AGNC to “navigate without issue” and avoid forced deleveraging or asset mix changes .
• Hedge composition: Short-run advantage in mortgages vs swaps; long-run base case to balance swaps and treasuries (~50/50) to diversify risk .
• Prepayment/convexity: Some increase in convexity risk post Rocket–Mr. Cooper merger, but overall system still far from significant refi risk; ~95% of higher coupon holdings have prepayment protections .
• Capital raising/deployment: ATM issuance remained opportunistic and accretive; deployment concentrated in 5%–5.5% coupons; improving dollar roll carry may increase TBA usage .

Estimates Context

Values retrieved from S&P Global.
Note: For Agency mREITs, “Primary EPS” typically maps to core/net spread & dollar roll income per share; GAAP EPS was $0.02 . Revenue estimates for mREITs are not consistently defined; therefore, we anchor comparisons on EPS/core and spread metrics.

Key Takeaways for Investors

• Core earnings momentum: Net spread & dollar roll income/share increased to $0.44 and beat Street, driven by a 21 bps spread expansion and lower funding costs—supportive for dividend continuity near term .
• Book value sensitivity: TBV/share fell to $8.25 in Q1 and was estimated $7.75–$7.85 by Apr 9 amid spread volatility; watch mortgage vs swap spread normalization and regulatory catalysts (SLR) for TBV trajectory .
• Liquidity buffers: $6.0B unencumbered cash/Agency MBS (63% of equity) plus ~91% hedge coverage provide capacity to weather volatility without forced deleveraging—mitigating downside risk .
• Risk-adjusted returns: Management highlighted unprecedented mortgage vs swap spreads implying 19%–22% expected ROEs vs ~16.7%–18% cost of capital—constructive for capital deployment and dividend support .
• Positioning: Portfolio concentrated in 5–5.5% coupons with increased prepay protections; improving dollar roll carry could favor higher TBA utilization, enhancing carry without balance sheet expansion .
• Watchlist catalysts: Bank capital relief and SLR changes, stabilization of swap spreads, and macro resolution on tariffs—each could tighten spreads and lift TBV/returns .
• Tactical stance: Maintain attention to leverage discipline (~7.5x at quarter end), hedge diversification, and opportunities to issue/share accretive capital in premium markets .

Bold indicates a significant result (beat/miss or surprise).

Footnote: *Values retrieved from S&P Global.